Question
A) A firm is must choose to buy the GSU-3300 or the UGA-3000. Both machines make the firms production process more efficient which in turn
A) A firm is must choose to buy the GSU-3300 or the UGA-3000. Both machines make the firms production process more efficient which in turn increases incremental cash flows. The GSU-3300 produces incremental cash flows of $24,009.00 per year for 8 years and costs $98,700.00. The UGA-3000 produces incremental cash flows of $27,624.00 per year for 9 years and cost $126,582.00. The firms WACC is 9.62%. What is the equivalent annual annuity of the GSU-3300? Assume that there are no taxes.
B) A firm is must choose to buy the GSU-3300 or the UGA-3000. Both machines make the firms production process more efficient which in turn increases incremental cash flows. The GSU-3300 produces incremental cash flows of $24,065.00 per year for 8 years and costs $101,753.00. The UGA-3000 produces incremental cash flows of $28,302.00 per year for 9 years and cost $126,529.00. The firms WACC is 7.78%. What is the equivalent annual annuity of the UGA-3000? Assume that there are no taxes.
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